Spending review: The Coalition has been bold - now it's our turn

The Government needs to encourage citizens who face the prospect of
unemployment.

The deepest public spending cuts in living memory were announced this week and the world did not end. On Wednesday, George Osborne announced a Comprehensive Spending Review (CSR) that could abolish the jobs of half a million Britons working in the public sector. By the close of the day, polls showed that his review was supported by a majority of the population, albeit a slender one. That is no mean achievement. The cuts will provoke real anguish in parts of society, especially for families trapped in welfare dependency, together with plenty of simulated outrage. But – despite one or two serious misjudgments, notably over child benefit – many influential commentators feel that they have been sensibly distributed according to a reasonable timetable. Given the unpredictability of the global economy, any deficit-reduction strategy is a gamble. Whether it pays off in the form of economic growth remains to be seen; but the Coalition appears to have placed its bets wisely.

Now it must improve the odds in favour of growth. Governments cannot grow economies as if they were tomato plants (though it took decades of bungled experiments for this truth to sink in). What they can do – sometimes – is create the conditions for prosperity. With the first stage of the CSR behind it, the Coalition wants to move from a narrative of austerity to a narrative of growth. Fair enough: the cuts are a necessary condition for economic recovery. But they are not a sufficient condition. If we are to reach the sunlit uplands, then the weight of unnecessary taxes and regulations must be lifted from the small and medium-sized businesses that the Government rightly identifies as central to recovery.

The snag is that every British government for years (including control-freak Labour ones) has promised to liberate business from red tape. Usually this goes hand in hand with a pledge to regenerate depressed regions of the country. But what does experience teach us? First, that the bonfires of red tape tend to be confined to the imaginations of politicians: ask a businessman if he can remember being “liberated” from anything in the past few years. Second, that the prosperity created by regional regeneration is often fragile, dependent on just the sort of taxpayer-funded projects and jobs that the country can no longer afford to subsidise.

All of which is discouraging, particularly given the new uncertainties of globalisation. But recent history also offers grounds for optimism. Despite the illusory nature of much urban renewal, certain policies of the Conservative governments of 1979-1997 worked well: not just tax-free enterprise zones, but also the enterprise allowance scheme that turned benefit payments into seed money for 325,000 small businesses. It is good news that Lord Young of Graffham, author of that scheme, is involved in the Coalition’s attempts to replicate that success. We urge ministers to approach the task of regeneration in a spirit of boldness, passing new laws if necessary to circumvent EU regulations designed for slow-paced, state-directed economic activity. Hiring and firing staff is too difficult in modern Britain; it is as simple as that.

Also, crucially, the Government needs to encourage the same spirit of boldness in citizens who face the prospect of unemployment. Many of them are educated and resourceful people; and even those who are less qualified should be able to take advantage of a labour market that is more flexible than is generally recognised. When Iain Duncan Smith, the Work and Pensions Secretary, suggested this week that job-seekers should take a bus to look for work, the BBC reacted, predictably, as if he had instructed them to crawl on their hands and knees. The implication that searching for employment is by definition an indignity is ridiculous in an age of developing economies. Britain’s journey from austerity to growth is more than a metaphor: it depends on a greater willingness to relocate and to travel to work. And if that involves catching a bus, so be it.